Whether it’s a condominium, townhouse, or home, buying property is an exciting journey! One of the factors you need to consider as a property buyer is a Homeowners Association (HOA). If you don’t ask the right questions or do the research, it can be a costly mistake. Here’s what you should ask before buying a property with an HOA.
What is an HOA?
An HOA makes and enforces rules for a subdivision, planned community, or condominium. All residents are part of the HOA when they own property in that subdivision. You’ll pay your HOA fees monthly, quarterly, or once a year, depending on the HOA. HOAs are usually run by a board composed of the community’s residents since other homeowners elect them. Sometimes, an HOA can be run by a private, third-party organization (Prism Realty Management offers this service!)
Will the HOA fee change?
The HOA fee may be increased in the future, if approved by the homeowners within the community. The fees are collected to pay for community-wide maintenance, landscaping, and to maintain the community’s amenities. It’s important to remain informed as to where your dues go.
When was the last time the HOA raised its dues, and by how much?
Ask for a history of the HOA dues. If the HOA has raised its dues over the past couple of years, ask questions. What were the reasons for the increases? Are there any deferred maintenance projects within the community that you need to be aware of? If there is a history of significant, unexpected spikes in monthly dues, it can be a sign of poor management. Don’t be afraid to ask questions.
How much does the HOA have in reserves?
While most of the HOA fee goes to maintenance for the community, a small part typically goes into reserves. The reserves are intended to cover future community repair, replacement, or emergency projects. If the HOA lacks funds for the reserve, dues may increase in the future. Be sure to ask how the reserves are funded and the percentage of the HOA’s overall budget for repairs. This will help piece together how the HOA maintains its budget.
What exactly do HOA dues cover?
Once you know how much dues are and if or when they’re expected to rise, you want to ask where the money is going and what it’s being spent on. While most fees go to maintenance, ask for specifics. Do they cut grass and maintain the sidewalks and roads in the community? Does it cover the maintenance of a community pool, tennis courts, parks, or gyms? If yes, ask yourself if you will use these services and if the price is worth these services. If you don’t feel it’s worth it, you may want to consider properties that are not in an HOA.
Are there any rental restrictions, and what are they?
This question is crucial for real estate investors or buyers purchasing a property to rent it out later. The answer will vary amongst different HOAs as some allow a certain percentage of units to be rented. Others have a mandatory occupancy period before renting. Find out the restrictions and if it supports the long-term goal you have for the property.
Contact Prism Realty Partners if you need help finding a home with or without an HOA!